As the holiday shopping season draws near, the weaker retail chains will be facing their hour of reckoning, with their sales growth during the November/December period determining their ability to survive. And while most retailers have already closed their worst performing stores and made their operations as lean as possible over the past few years, the uncertain economic climate might lead to a substantial number of store closures in the first quarter of 2012.
By conservative estimates, next year will likely bring more than 5,000 store closings, says Michael S. Wiener, president and CEO of Excess Space Retail Services Inc., a national consulting and advisory firm specializing in disposition and lease restructuring. And that’s not counting closings related to bankruptcies and liquidations.
The reasons are easy to point to: consumer confidence is still low and economic uncertainty has left many business leaders with a conservative mindset. Meanwhile, while U.S. retailers have been able to restructure a significant number of their leases in 2008, 2009 and 2010, by this point in the market cycle, if the stores are not bringing in a sufficient volume of sales, even lower rents can’t save them, Wiener notes.
Already in the fourth quarter, discount retailers Syms and Filene’s Basement have filed for bankruptcy, with plans to liquidate after the end of the holiday season.
“Lease restructuring efforts have staved off many store closings, but as time has worn on, many retailers are now having to face the reality of a grouping of stores within their portfolio that just don’t work,” Wiener says.
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